Scrutiny over how development fees are negotiated after Boffo project halted

After 15 years of planning and fundraising, the Kettle, a mental health non-profit in Vancouver has backed away from their joint project with a developer to build 200 market units and 30 supported-housing units for mentally ill people in Vancouver.PNG

There are rising concerns about what some say is the ad hoc and closed-door nature of negotiations when the City of Vancouver demands so-called community amenity contributions from developers.

The Boffo Properties plan for a non-profit, social-housing project in conjunction with the Kettle Society in east Vancouver fell apart this week with the developer saying the city demands were too expensive. So far, it is the only public example of such a developer-non-profit project collapsing.

Developers have recently been more vocal in complaining about how fees and taxes charged by the city are climbing and making it more expensive for buyers and renters of new homes.

And there are growing questions about how the city determines these amenity charges.

In particular, developers looking to construct purpose-built rental buildings have said they feel there should be no community amenity contribution charges when developers are already helping the community with affordable or non-profit housing units in their project.

The Kettle project was to combine supportive housing, condos, and mental health facilities. Boffo Properties said this week that additional development costs expected to be imposed on the project render it “financially unviable.”

Developers argue that in offering features such as affordable housing, they are already putting less money in their own pockets and taking longer to get a return on their investments than they would in simply building a condo tower.

In late 2017, PCI Developments dropped a plan to build a downtown Vancouver rental building with 215 units. PCI president Andrew Grant suggested it might be helpful if the city had an advocate “within the planning department, spanning different departments, to bridge challenges and expedite rental housing.”

There have been “other rental projects killed because the city kept tightening and asking for more, and one where the city got embarrassed and had to give in rather than upping the ante and asking for more (money) when the developer basically gave it the finger,” says David Goodman, a commercial real estate agent who specializes in apartment building sales.

What developers aren’t willing to do is make public their financial math, technically known as their pro formas.

This would reveal with more certainty the impact of rising community amenity charges on their profits and what they could potentially shave off from their earnings rather than just pass on to the buyer or renter.

Some developers argue they can’t do this because it would compromise their ability to do business by revealing information to competitors.

“It’s their secret sauce,” says Pete Fry, a community advocate seeking the Green party nominations for city council. “But I’m not sure that’s a valid critique. There’s currently no clarity.”

Without those details, says Fry, “I don’t think there is any transparency here to make an informed opinion on this.”

On Twitter, Fry recounted speaking to Boffo principal Daniel Boffo about the Kettle project in the past in the context of neighbourhood resistance. “I suggested that the best solution might be to open the books, show people the pro formas — ie. the numbers that make the project work vis-a-vis public land and public benefits involved. He was incredulous — ‘Why would I let people see my profits?’”

“These negotiations go on behind closed doors, so the public has no idea if Boffo is making reasonable demands for profits,” said COPE city council candidate Anne Roberts in a statement. “In projects like these, Vancouverites deserve to see the details of all public contributions and developer profits.”

Community amenity contributions are cash or in-kind contributions that property developers must pay to the city in exchange for the re-zoning they need to build more units. The city uses the money for parks and libraries, and has become increasingly reliant on community amenity contributions to fund the city’s capital plans.

Of the estimated total $2.57 billion the city is proposing to spend in its capital plan for the next three years, 55 per cent (or about $1.44 billion) is earmarked to come from funds raised by charging real estate developers. This is up from 33 per cent of the budget total in the capital plan for 2015-18 and from 12 per cent in the plan for 2012-14.

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